United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
JAMES B. ZAGEL, District Judge.
Plaintiff NTE LLC ("NTE"), a web-based supply chain solution provider, seeks a preliminary injunction against Defendants Kenny Construction Company ("Kenny"), Nalcor Energy, Ameren Corporation, Electric Transmission Texas LLC, and Arizona Public Service Company, and Doe SAAS Company ("Defendants") based on claims of copyright infringement under 17 U.S.C. § 101 et seq. (Counts I-III), breach of contract (Count IV), and misappropriation (Count V). Plaintiffs seeks to enjoin Defendants from (1) using NTE proprietary data; (2) using any reports or documents reflecting the NTE proprietary data; (3) encouraging or facilitating others to use the NTE proprietary data or any information derived therefrom; (4) copying, retrieving, transmitting, disseminating or otherwise maintaining the NTE proprietary data or any information derived therefrom; (5) using NTE's proprietary and copyrighted data compilation; and (6) developing any system or software that uses or requires the NTE proprietary data or NTE's data compilation. In sum, NTE seeks a preliminary injunction ordering Kenny Construction and Kenny Defendants to stop using NTE-generated data, particularly NTE-generated historical data, to its benefit.
On December 4, 2014 and January 21, 2015, evidentiary hearings were held on NTE's motion for a preliminary injunction at which both Plaintiff and Defendants presented evidence and examined several witnesses, including Robert Rocque and David Thompson of NTE and Peter Oswald and William Perrich of Kenny Construction Company. Additionally, the Court considered NTE's complaint, motion, memorandum in support, and exhibits, Defendants' oppositions, the parties' supplemental submissions, and arguments of counsel. For the following reasons, Plaintiff's motion is denied.
II. Statement of Facts
Kenny Construction, a wholly-owned subsidiary of the Granite Construction Company ("Granite"), first subscribed to NTE's cloud-based software system (the "Software Suite") in 2011 to acquire logistical support in the construction of power line transmission towers, solar power transmission projects, inventory management, and wind energy transmission projects. Kenny had previously used an internal "Access Database" system, but chose to use NTE's Software Suite for its more robust and portable management of Kenny's supply chain.
Kenny Construction and NTE's relationship is governed by the Master Professional Service Agreement ("Service Agreement"), a six-month contract entered into on January 8, 2014, with the right to extend for an additional six-month period. Pursuant to the Service Agreement, Kenny Construction paid NTE a monthly subscription and support fee of approximately $130, 000 for hosting and licensing the Software Suite. Paragraph 7 of the Service Agreement expressly reserves ownership of all intellectual property, including data and reports generated by NTE, to NTE, while Kenny maintained rights to any data it supplied to NTE.
Kenny, at varying times, operated four ongoing projects on the Software Suite: Nalcor Energy ("Nalcor"), Ameren Corporation ("Ameren"), Electric Transmission Texas LLC ("ETT"), and Arizona Public Service Company ("APS") (collectively the "Kenny Construction Defendants"). For each of these projects, Kenny Construction provided NTE with data in "CSV" files falling into three categories: (1) initial purchase orders; (2) a description of types of items Kenny may have in inventory ("item master"); and (3) a list of towers and the main item master components that make up the towers. NTE corrected for any formatting issues and imported the data into NTE's Software Suite, which could then be used to generate reports. The Software Suite analyzed and manipulated NTE-generated data ("NTE Proprietary Data") contained in database tables with NTE-generated identifiers (e.g., barcodes, date and time stamps, dispositions throughout the lifecycle of each project), along with other derived information to achieve its functionality.
NTE asserts that Kenny shared screenshots of NTE proprietary information, in violation of the Service Agreement, in seeking to get bids from two competing software vendors. Upon returning the contested proprietary information, as requested by NTE, Kenny unsuccessfully attempted to acquire ownership in the NTE proprietary data through an amendment and extension of the Service Agreement. Kenny claimed that after NTE disrupted Kenny's service, Kenny became aware of its reliance on the use of the Software Suite to run the daily operations of its various projects and thus Kenny's resulting vulnerability to NTE. To protect itself, in or around July 2014, Kenny deployed employee Mr. Peter Oswald to begin developing its own in-house solution to manage the supply chain for its power line transmission tower projects, culminating in the "KCC Internal System."
To populate data into the KCC Internal System for the ETT project, Kenny employees generated and printed item inventory reports from the NTE system that displayed each transaction associated with a barcode. Kenny employees then created a new barcode, different than the NTE barcode, for each piece of equipment and updated each barcode with information from the item inventory report given to NTE by Kenny and owned by Kenny-location, date received, date moved, or date issued-for each bar code. Kenny claims that it did not input any information from the remaining columns of data for each bar code transaction contained in the barcode summary report for the ETT project. NTE, however, claims that the date of the most current receipt was NTE proprietary data pulled directly from the inventory report for the ETT project.
Kenny Construction denies using extracted data for the projects with Ameren, Arizona Public Service Company, or Nalcor Energy, reasoning that they did not require historical data that had been inputted into the Software Suite. NTE, however, asserts that Ameren entered historical data from NTE into their own system and that Nalcor is still directly accessing NTE proprietary data relating to the Nalcor project from the Software Suite without a license or subscription to NTE.
A court may issue a preliminary injunction enjoining copyright infringement if the moving party demonstrates (1) a likelihood of success on the merits; (2) that it has no adequate remedy at law; and (3) that it will suffer irreparable harm if preliminary relief is denied. Abbott Labs. v. Mead Johnson Co., 971 F.2d 6, 11 (7th Cir. 1992); s ee also Eli Lilly & Co. v. Natural Answers, Inc., 233 F.3d 456, 461 (7th Cir.2000). If the movant passes this threshold, the court must then balance any irreparable harm that will result to the nonmoving party and whether the injunction is in the public interest. See Jack Guttman, Inc. v. Kopykake Enters., Inc., 302 F.3d 1352, 1356 (Fed.Cir.2002); Eli Lilly, 233 F.3d at 461. Finally, the court should use a sliding-scale approach to weigh all four of the factors against each other, so that the more likely that a plaintiff ...